Boston Chicken Inc. filed for bankruptcy protection and closed 178, or 16 percent, of its 1,143 Boston Market restaurants, because the once high-flying restaurant chain is running out of cash to pay debtors.

Boston Chicken, one of the hottest investments of the early 1990s, filed voluntary petitions for reorganization under Chapter 11 in the U.S. Bankruptcy Court in Phoenix. A group led by General Electric Capital Corp. and Bank of America agreed to lend it $70 million in debtor-in-possession financing.

The company fell on hard times the last two years, as supermarkets and others began selling cheaper ready-to-eat roasted chickens. Weak sales and profits led to a cash crunch, forcing Boston Chicken to write off hundreds of millions of dollars in loans to franchisees who borrowed to expand the chain.

"They just expanded too quickly, and the concept just got dull," said Neil Dorflinger, a director of DLS Capital Partners, who bet in the last six months that the stock would fall and owns some of the company's debt. "They won't liquidate, but they are going to have to shrink a lot."

The shares of Golden, Colo.-based Boston Chicken, the No. 2 quick-service chicken chain in the United States after Tricon Global Restaurants Inc.'s KFC, fell 1/4 to 1/2.

Boston Chicken said 2,700 employees are being transferred to stores that will remain open. The company plans to leave 14 cities, where 500 hourly workers will be fired. It has 18,500 employees in total. The company closed all of its stores in Moines, Iowa; Louisville, Ky.; and Nashville and Memphis, Tenn., among others.

The company said it filed for bankruptcy protection because it was unable to come to new terms with its debtors. Boston Chicken has said that about $283 million in senior debt is due Oct. 17. The company has public subordinated debt of about $625 million.

Analysts in recent months had said that filing for Chapter 11 could help Boston Chicken cut costs and renegotiate leases, which are some of the most expensive in the restaurant industry.

Boston Chicken was founded 13 years ago in Newton, Mass., by Steven Kolow and Arthur Cores. In 1992, a group headed by former Blockbuster Entertainment executives Scott Beck and Saad Nadhir bought the company.

Boston Chicken's shares more than doubled the day it went public in November 1993 for a split-adjusted $10. Investors expected baby boomers and others to snap up its roasted chicken and side dishes, most of which was meant to be eaten at home. The shares reached a high of 41 in December 1996, and have traded at less than 1 for the past month.

The company started on an aggressive expansion after its IPO. It changed the name of the restaurants to Boston Market in 1995 to reflect a menu that had grown to include roast turkey, baked ham and meat loaf.

The company was hurt, though, as grocery stores started to sell pre-made meals and Boston Chicken moved into the cutthroat fast-food arena with lunch sandwiches.

Other marketing miscues, such as excessive use of coupons, also cut into sales and cash flow. Then it paid too much for failing franchised stores, which contributed to losses the past three quarters.

Boston Chicken's products were just too expensive, said Peter Chapman of Bankruptcy Creditors Services Inc. Whole roasted chickens at the restaurants cost about $5.99, compared with about $4.99 at supermarkets.

"When dollars become an issue, people are going to buy at the supermarkets," Chapman said.

In the last 18 months, sales at Boston Market restaurants open at least a year dropped to about $16,000 a week from $26,000, Dorflinger said.